Construction Industry Scheme – What is it? How can it help you?
The Construction Industry Scheme, also known as CIS, is a specific set of rules for the tax and national insurance for self employed workers in the construction industry.
The CIS applies primarily to those in construction but also other jobs such as repairs, demolition and decorating. If you aren’t sure if you are effected by the CIS, speak to one of our accountants on 01442 275 767 or email firstname.lastname@example.org and they will be happy to help.
Contractors and Subcontractors – How are they effected?
There are differences between the two and when you register for the Construction Industry Scheme and you will need to indicate whether you primarily operate as a contractor or a subcontractor as the rules and regulations vary for each.
Are you a contractor?
For the purposes of the CIS, any business spending in excess of £1million per annum on construction is classed as a contractor.
As a contractor, you’ll need to verify any subcontractors that you haven’t included on a CIS return over the past two tax years. You’ll then need to deduct specific amounts from any payment you make to a subcontractor under CIS.
When you verify a subcontractor, HMRC will notify you what rate of CIS deduction to use or if you actually need to deduct anything. Don’t worry if this all sounds a bit too complex, your friendly Easy accountant will be able to handle everything for you.
Are you a subcontractor?
As a subcontractor, your contractor will make CIS deductions from any payments they make to you. These deductions will count towards your tax and National Insurance when you complete your self-assessment tax return.
Once you are fully registered on the CIS, you can apply for “gross payment status.” This will allow you to take full payment from contractors without any deductions, provided you meet a few basic criteria.
The gross payment status criteria include:
- As a sole trader, is your turnover £30,000 or more over the past 12 months?
- As a limited company owner is your turnover at least £30,000 for each director?
- Have you kept up to date with your tax and National Insurance payments?
For more information on registering for gross payment status, call the CIS helpline.
If you are an employee
If you are an employee of a contractor or subcontractor you don’t need to worry about the CIS as it doesn’t apply to you and you’ll pay tax through PAYE rather than through the CIS.
If you are a bit confused as to whether you are an employee or a contractor, HMRC have an employment status indicator tool on their website and it should be able to make things a bit clearer for you.
Registering for the Construction Industry Scheme
You can register for the CIS directly with HMRC. If you are already self-employed but have not yet registered for the scheme you can call the CIS helpline and ask them to register you, just have your Unique Tax Reference (UTR) to hand.
Alternatively, if you aren’t already self-employed, you can register for the CIS when you register as self-employed.
When CIS isn’t applicable
CIS isn’t always applicable. If you are carrying out specific types of work that are not covered by the scheme, you do not need to register.
To find out more about whether or not CIS applies to you, speak to one of our expert accountants by calling 01442 275767 or emailing email@example.com.
CIS Tax Rebates
As a CIS worker, you will automatically pay a flat fee of 20% tax. This means that often CIS workers over pay on tax and are owed a tax rebate at the end of the tax year. If this sounds like you, our sister company Brian Alfred can help. They’re experts in CIS rebates and will make sure you receive the maximum rebate in the quickest time. Visit the Brian Alfred website to see how they can help.
Completing Your CIS Returns
As part of the CIS you need to file monthly returns with HMRC to inform them of the payments that you are making to subcontractors as part of the scheme.
You can submit your returns in two ways, either electronically or by paper. It is recommended that you do so electronically, as it is both the easiest and most efficient way of filing a return and you have the peace of mind of knowing that HMRC receive it instantly.
Of course, as a business owner you have many demands on your time and you may not necessarily be able to find enough hours a day to complete a CIS return every month. At Easy Accountancy, our expert accountants have a wealth of experience in dealing with CIS clients and they will be able to take a weight off your mind by completing your CIS returns for you. All you will need to do is take a few minutes each month to complete a short spreadsheet to detail your payments to subcontractors.
For more information on our services, please call 0500 234 111 / 01442 275 767 or email firstname.lastname@example.org.